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To comply with federal tax laws, nonprofit organizations must have a board of directors. Nonprofit boards differ greatly in numbers and responsibilities, but ultimately it’s the board’s role to oversee the funding of the group and ensure its resources are used properly. Additionally, the board hires the organization’s CEO, who then reports to the board.

Define the Mission

The board of directors defines the goals and mission of the nonprofit organization. This usually is done through the formation of a mission statement that clearly spells out the group’s purpose, who and what it supports and how it achieves its goals. The board must ensure all stakeholders receive a copy of the mission statement and understand its intent. Periodically, the board should review the mission to ensure that it’s still relevant.

Hire the Director

The board hires the chief executive officer, the paid leader of the organization. It may hire an outside search firm or use other volunteers to conduct a search, call for resumes and interview prospects, but the board makes the final decision. Prior to the search, however, the board should clarify the roles and responsibilities of the director or CEO and create a job description. The board also sets the salary and benefit package to offer the director and conducts regular performance reviews.

Oversee Finances

The financial health of the nonprofit organization rests with the board of directors. The board sets a budget for the director and staff to follow and oversees the spending and revenue. Board members usually are involved in fundraising and often are asked to make substantial contributions from their own resources as part of their fiduciary duty to the organization. Even if they don’t personally make contributions, board members are responsible for setting a strategic plan to raise funds. Board members must be free of conflicts that could interfere with their fair judgment of company assets and spending.

Monitor the Organization

In addition to overseeing the funding streams, the board of directors monitors the programs offered by the nonprofit group. Without resorting to micromanagement of the staff, the board receives regular reports and updates about the programs, populations served and priorities set by the staff. The organization’s executive and staff members may create plans and then bring them to the board for final approval. Fundamentally, it’s the board’s responsibility to ensure programs are in keeping with the organization’s mission statement.

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About the Author

Linda Ray is an award-winning journalist with more than 20 years reporting experience. She's covered business for newspapers and magazines, including the "Greenville News," "Success Magazine" and "American City Business Journals." Ray holds a journalism degree and teaches writing, career development and an FDIC course called "Money Smart."